Hana Securities said on the 27th that entry into the integrated investment account (IMA) and issuance bill businesses is positive for the securities sector, and noted that concerns about profitability due to intensifying competition are premature. It then suggested overweight for the securities sector.
At the 20th regular meeting on the 19th, the Financial Services Commission (FSC) designated Korea Investment & Securities and Mirae Asset Securities as comprehensive financial investment companies (broker-dealers) with equity capital of 8 trillion won or more, and Kiwoom Securities as a broker-dealer with equity capital of 4 trillion won or more. Accordingly, Korea Investment & Securities and Mirae Asset Securities plan to launch IMA products within the year, and Kiwoom Securities plans to launch issuance bill products within the year.
Securities firms currently awaiting approval for issuance bills are Samsung Securities, Meritz Securities, Hana Securities, and Shinhan Investment, and NH Investment & Securities is awaiting IMA approval.
Ko Yeon-su, a researcher at Hana Securities, said, "In the case of issuance bills, there have been concerns about intensified competition due to an increase in new players, and if all new players obtain approval for issuance bills, the theoretically possible new funding amount is about 64 trillion won."
Assuming the actual issuance rate is about 50% of each company's issuance limit, the new funding that would flow in through issuance bills is about 1.6 trillion won.
Ko said, "Considering the pace at which existing participants—Korea Investment & Securities, Mirae Asset Securities, NH Investment & Securities, and KB Securities—are exhausting their issuance bill limits, it is early to predict volume grabs and damage to profitability due to intensified competition in the short term."
In the medium to long term, securities firms are expected to see greater synergy between retail and corporate finance (IB). Ko said, "Kiwoom Securities will likely be able to secure long-term corporate loans and other investment assets by using issuance bills, and in this process the role of the IB will expand."
He added, "In the medium to long term, if securities firms' underwriting businesses ramp up in line with the government's stance to boost supply of venture capital, performance differentiation will emerge based on each securities firm's ability to select quality assets and manage risk."